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In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

On January 1, 2020, Uniform Co. sold its 2-year old equipment to XYZ Inc. for a cash down-payment of P100,000 and a non-interest bearing note with a face amount of P900,000 due December 31, 2021. There is no established price for the equipment but its carrying amount on the company’s books was at P600,000. The prevailing market rate of interest for similar note of this type on the transaction date was at 10%. On December 31, 2020 XYZ developed a financial difficulty and it was apparent that it will no longer be able to settle the amount due on December 31, 2021. To maximize the recovery of the note, Uniform agreed to extend the maturity of the note to up to December 31, 2022.  Furthermore, Uniform also agreed to reduce the principal amount by 25%.

How much is the impairment loss to be recognized on the note in 2020?

342,149

204,545

260,331

286,364

Question 2

A.   List two (2) policies a company may adopt to lessen the risk of uncollectible accounts and improve its cash flows.

B. Joseph Corporation a mobile phone wholesaler sells mobile phones to PhoneTech Ltd, a mobile phone retailer on August 1, 2020 for $500 each, the value of the sale is $50,000, with credit terms of 3/10, n/30. Assume the company uses the net method to record accounts receivables.

Required:

a. Prepare the journal entry to record the sale.

b. On August 8, 2020, collection on $15,000 of the sales was received from PhoneTech. Record the necessary journal entry for the cash received.

c. The remaining $35,000 of the sales was collected on August 28, 2020 from Phone Tech. Record the necessary journal entry for the transaction on this date.

Computing EPS: Restricted Stock Awards

West Inc. granted 5,000 shares of restricted common stock shares at the beginning of 2020 to company managers that will vest after 4 years of service. Net income for the year is $360,000, and 250,000 common shares were outstanding the entire year. The fair value of the shares on January 1, 2020, is $25 per share. The average market price of common shares in 2020 is $25 per share.

a. Compute basic earnings per share.

b. Compute diluted earnings per share.

Note: Round per share amounts to two decimal places.

At December 31, 2020, the available-for-sale debt portfolio for Crane, Inc. is as follows.

On January 20, 2021, Crane, Inc. sold security A for $16,100. The sale proceeds are net of brokerage fees.

Crane, Inc. reports net income in 2020 of $124,000 and in 2021 of $147,000. Total holding gains (including any realized holding gain or loss) equal $43,000 in 2021.

Prepare a statement of comprehensive income for 2020, starting with net income.
Prepare a statement of comprehensive income for 2021, starting with net income.

Windsor Inc. issued $3,840,000 of 10%, 10-year convertible bonds on June 1, 2020, at 99 plus accrued interest. The bonds were dated April 1, 2020, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis.

On April 1, 2021, $1,440,000 of these bonds were converted into 35,000 shares of $21 par value common stock. Accrued interest was paid in cash at the time of conversion.

At the end of 2019, Jeffco Inc. had the following equity accounts and balances:

During 2020, Jeffco engaged in the following transactions involving its equity accounts:

Sold 8,000 shares of common stock for $35 per share.

Sold 1,000 shares of 9%, $120 par preferred stock at $125 per share.

Declared and paid cash dividends of $14,000.

Repurchased 600 shares of treasury stock (common) for $45 per share.

Sold 100 of the treasury shares for $51 per share.

Required:

1. Prepare the journal entries for Transactions a through e.

2. Assume that 2020 net income was $93,000. Prepare a statement of stockholders' equity at December 31, 2020.

Flint Company has the following two temporary differences between its income tax expense and income taxes payable.

The income tax rate for all years is 20%

Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Question 1 (Main question is question2)

Cathy is bullish on Tencent; so she instructs her broker to sell 15/7/2020 European 500 put options on Tencent with an exercise price of $400 each share. Sandy agrees to buy these options and pays the premium of $7 each option. Without taking any transaction costs into consideration,

1. what will be Sandy’s gain or loss if Tencent’s price is $385 each share on 15/7/2020?   
2. what would be Cathy’s potential maximum loss on 15/7/2020?   
3. what is Cathy’s break-even price?   

Question 2

Re-visit Question 1. If the current price of each share is $380,

1. show how to determine Sandy’s initial margin.  
2. show how to determine Cathy’s initial margin.

TRW Inc. began business in 2018 and incurred net operating losses for its first two years. In 2020, it became profitable. The following table shows TRW’s taxable income before consideration of these NOLs.